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Allianz allays fears over Pimco

September 29, 2014

German insurance giant Allianz has tried to allay investor concerns about massive capital outflows from its Pimco investment fund unit. The losses mounted after the shock resignation Friday of its founder Bill Gross.

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Allianz Firmenzentrale München
Image: AP

The chairman of Allianz Asset Management Jay Ralph said Monday that leaders at the German insurance giant had been well prepared for the exit of Pimco co-founder Bill Gross.

On Friday, legendary bond investor Bill Gross left Pacific Investment Management Corporation (Pimco), the firm he founded in 1971, following a year of heavy outflows from his flagship Total Return bond fund and infighting in the investment firm.

Pimco, a unit of German insurer Allianz, was getting ready to fire Gross just before he resigned, according to people familiar with the matter.

Jay Ralph told German business daily Handelsblatt that it had long been clear to management that a change in Pimco leadership was "going to come one day."

"Pimco has changed over the past few years, turning from a founder-led bond investor to a global asset management firm," Ralph was quoted as saying in Monday's edition of Handelsblatt.

Ralph also said that Pimco's new Chief Investment Officer, Dan Ivascyn, was an excellent fund manager and team player. He stood for continuity, which would rule out a change of strategy at Pimco as well as divesting the unit, he added.

Capital flight intensifies

After the announcement Friday that Bill Gross would leave Pimco, investors withdrew massive amounts of cash from the firm's investment funds.

US business daily Wall Street Journal on Monday quoted sources with knowledge of the matter as saying that about $10 billion (7.8 billion euros) had flown out of Pimco funds over the weekend.

This adds to capital outflows of $65 billion suffered by Pimco since May 2013 and while Bill Gross was still solely in charge of managing Pimco's flagship Total Return Fund. The fund is the world's biggest bond investment vehicle with a volume of about $293 billion.

However, Pimco Chief Executive Dough Hodge said Sunday that the Total Return Fund did not "define" Pimco.

The Government Bond Crisis - Pimco's Investment Strategies

"It's an important flagship product of this firm but it's not our only strategy," he told the news agency Reuters. Hodge also said that he and Ivascyn had been speaking to clients all weekend about the new leadership structure.

"The outflows that have happened - and that may happen - we stand by our clients. We are managing assets and are confident that the vast majority of clients will stand with us," he said.

Shares in Pimco parent Allianz slumped about 7 percent at the Frankfurt Stock Exchange Friday, but recovered part of the losses on Monday, gaining 1.3 percent.

Bill Gross will depart Pimco for a position at Janus Capital Group where he will manage a newly created bond fund.

uhe/ng (Reuters, dpa)